"We've gotten to the point of being oversold," said Michael James, senior equity trader with Wedbush Morgan Securities.

The Dow Jones industrial average (INDU) gained 75 points, or 0.6%, to close at 12,124; the S&P 500 (SPX) added 9 points, or 0.4%, to 1,289; and the Nasdaq Composite (COMP) rose 9.5 points, or 0.4%, to end at 2,685.

Shares of Wells Fargo (WFC, Fortune 500) and Morgan Stanley (MS, Fortune 500) were among the biggest gainers on the S&P 500. Bank stocks are in recovery mode, after falling between 8% and 12% in the past month.

Analysts said trading will likely remain choppy as uncertainty continues to weigh on investors' minds.

"Until we get through the next few weeks and start to see additional economic data, and see what the Fed does in respect to QE2 or a successor to QE2, we're going to be in a period of disappointing news and heightened uncertainty," said Bruce McCain, chief investment strategist at Key Private Bank.

Trading volume was also light, with slightly more than 3 billion shares traded on the New York Stock Exchange, another sign that Thursday's rally might be short lived.

"There's certainly no conviction in this market based on the volume we have," said Ryan Detrick, senior technical analyst with Schaeffer's Investment Research.

Economy: The Labor Department released its weekly initial jobless claims data, showing that 427,000 people applied for unemployment benefits last week. That was slightly higher than expected, and marked the ninth straight week that the figure stayed above 400,000.